4 Colum. J. Eur. L. 125 (1998)
Maurits Dolmans. The author is a partner in the Brussels office of Cleary, Gottlieb, Steen & Hamilton.
While the rules of legal privilege have deep roots in the European legal systems, the legislation and case law in Europe on outside and in-house counsel privilege is often much less developed and refined than in the United States. The main reasons are, first, that except the United Kingdom and Ireland, most European countries do not have the adversarial and extensive discovery system that forms the foundation of U.S. litigation. Second, perhaps, lawyers and litigation until recently played a less important role in corporate management in Europe than in the United States. Questions of privilege therefore arose less often.
Recently, however, legal privilege has been the subject of renewed interest in the European Communities (EC). The European Commission has wide discovery powers. It is able to ask for production of documents through “Article 11 letters” and may conduct “verifications,” essentially dawn raids on the premises of companies suspected of infringements of EC competition law. With the emergence of national competition laws cloned from EC law, these powers are replicated in the EC Member States’ national legal systems. This growing complexity combined with increasing number of business transactions requiring antitrust advice has amplified concerns over the limits of the legal privilege.
While outside counsel legal privilege was recognized by the European Court of Justice in AM&S Europe Ltd v. Commission, the Commission has taken a critical attitude towards requests for in-house counsel privilege. This is perhaps understandable, given hearsay stories of companies attempting to dodge investigations. Many will argue, however, that the proper remedy is not to deny in-house counsel privilege, but to recognize it. This would allow in-house counsel the freedom to advise its client about the legal consequences of conduct without fear that its advice and any confessions made by the client will be subject to Commission scrutiny later. In-house counsel can play an invaluable function in maintaining the rule of law, and could be encouraged to assist rather than resist competition authorities in their role as guardians of fair competition.
Commission decisions seem to take exactly the opposite approach. In the Sabena/London European and John Deere cases the Commission even went so far as to cite in-house counsel advice as evidence that the company knowingly and intentionally infringed competition law. Problems also arise during verifications: in a recent case, the Commission denied a company the right to call in outside counsel-it did not wish to wait until counsel arrived–on the ground that in-house counsel was perfectly able to assist and advise the client, and yet insisted that a Commission official listen in to every conversation between the in-house counsel and his client during the verification.
Such a result is inefficient from an enlightened enforcement perspective and contrary to common notions of fairness, and something must be done to avoid similar situations in the future. Proposals have been made that in-house counsel privilege should be recognized in an amendment of Regulation 17/62, in a Directive harmonizing the role of lawyers in the EC, or by special decision. But legislative proposals will be difficult to complete without amending Regulation 17/62 (the basic procedural regulation). There is, however, a concern that some Member States will use the amendment process as an excuse to limit the Commission’s powers, and reinforce the role of national antitrust authorities. This result might endanger the one-stop shop principle and raise the specter of divergent application of EC (and national) antitrust rules.
One alternative is a practical rather than a legislative approach. In-house counsel could take steps (some of which I will outline below) to create an atmosphere of confidence and compliance with ethical rules that would allow the Commission to recognize in-house counsel privilege. In exchange, the privilege of in-house counsel’s legal advice should be recognized. In case of a dispute or doubt as to the privileged nature of a document, companies subject to disclosure should be given a chance to review their in-house counsel documents with outside counsel present.
In cases where extensive facts or non-legal communications are commingled with legal advice, the company should be allowed to produce edited copies. In this way companies could still provide the required factual information, without revealing language reflecting legal reasoning, requests for legal advice, and legal conclusions. To the extent that the factual information and legal reasoning cannot be separated, the company should be allowed to provide a paraphrased description of the facts that is as close as possible to the original text. If needed, or in case of doubt or dispute, the Commission’s Hearing Officer could then compare the two sets of documents under confidentiality. This should allow the Commission to review these facts without creating a situation that could seriously prejudice the effectiveness of in-house legal departments, to the detriment of the rule of law. In my view, the Commission has administrative discretion to follow this course of action without the adoption of legislative measures.
Following an overview of the current legal status of in-house privilege in the European Community in Part I, this Article will in Part II critically evaluate the current state of the law and point to certain measures which, if adopted, would permit in-house counsel to claim privilege consistent with case law. Part Inl will detail a proposed procedure to invoke privilege. Finally, in Part IV, this Article will substantiate the claim that the Commission has the power to invoke the proposed procedure.